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The Central Bottling Company, more commonly known as Coca Cola Israel, has agreed to buy out the Tara dairy cooperative for $39 million.

The agreement, signed in principle, is subject to due diligence and sundry approvals.

At present Tara, established in 1942 - six years before the State of Israel - is controlled by a group of 33 families. It produces a wide range of milk, dairy and cheese products. Its dairy is located in the Nahalat Yitzhak section of Tel Aviv where the company employs 600 people.

Tara is the third-biggest player in Israel's dairy industry, with between 12 to 14 percent of the market. Tnuva is the largest, followed by Strauss. Tara's 2002 sales totaled more than $100 million.

Tara's chair, Tova Avrech, commented: "We view the agreement with the Central Bottling Company (Coca Cola Israel) as an important breakthrough that will drive the company forward and contribute to advancing its marketing, consumer and commercial activities."

Central Bottling Company president Ron Kobrovsky said the acquisition was designed to expand the company's product range and get it into dairy, mainly dairy beverages, which are a growing category in Israel.

"Tara has market orientation, quality products and a high level of technology," Kobrovsky said, adding that Central Bottling will be spending the next months studying the company and its field, while consolidating a business plan together with Tara people.

The present structure, in which Tara was controlled by all 33 families in tandem, had been hampering its business development. Its management board had been examining how to incorporate it. One option had been to float the company on the Tel Aviv Stock Exchange.